In this episode the rubber hits the road and our app is being put to the test. Will it succeed or fail? To get to this point an appreneur — either an app-based startup, or an existing business creating an app — should already have things sorted, as laid out in previous episodes:
* Business plan with fixed and growing costs, unique value and revenue
* Product tested by selling value via a duct-taped together MVP
* A basic understanding of what apps are, the risks and how to avoid them
Money is one measure of success. Think about what success means for you. I’ll assume at least you want folks using the app, right?
Let’s jump right in.
Start with your customers. What do they want to do?
Working with your UX designer, and your product owner, answer this question: what are my customers trying to achieve?
How your app succeeds starts with Jobs to be Done:
Jay, an office worker, wants to eat healthier & searches for meal plans
Here wants to eat healthier might be unrelated to your business about recipe sharing with online ordering, but let’s say your app can help Jay search for meal plans and has filtering for healthy options.
The search is a task in your app, that helps toward a goal.
I saw founders struggling with apps because they have a lot of functionality that they want to put in — especially if they have a website full of stuff — once they start building an app the first thing they want to do is cram all of that in. Shoehorn their website into the mobile user experience. Successful apps are the ones that work for what customers want to do.
Successful apps are the ones that work for what customers want to do.
They don’t want AI, they don’t want 256bit encryption, they don’t want a laundry list of obscure features. They want easy meals they can eat. They want to find a nanny they can trust.
The Jobs to be Done framework and also Persona creation will help a Product Owner home in on this.
Monetisation in Apps
In the initial App Store gold rush in 2010 onward, we got what I’m going to call “Classic Apps”, like Instagram & the app then known as Twitter. Instagram happened because we all have a camera in our pocket now. Twitter was invented because we were OK with texting on our phone. They’re known as phone apps, but have web presences as well.
Note: when I say “inside the app” or “on the phone” remember apps these days are part of the fabric of the internet. I mean the whole app platform.
We are also familiar with mobile games like Candy Crush, or apps such as Duolingo that teaches you languages. Here the value that lures the folks to the platform is some in-app offering — like learning a language, or playing a game.
Often these kinds of apps have known, logged in users who see advertisements that the platform shows to them. These users are valuable to advertisers.
Free to Play Apps
What’s common to these apps is they make money because the actual app itself has some value that it delivers to its users — learn a language, share a photo.
Free apps generate revenue from the app directly. They survive by acquiring a wide funnel of incoming users, retaining and monetising them.
The critical strategy for this kind of free app — and I include freemium here — is to have a wide funnel of incoming users, who go through the classic cycle of acquisition, retention and monetisation.
It’s very common to have the customers pay for that value by ingesting advertisements. Other possibilities are subscriptions with a free month, which have become hugely popular, and in-app economies, like Trello Gold or Gems.
Premium Apps
In some classic apps customers can upgrade from the free to the premium version by completing an in-app purchase, or by buying the premium app in the App Store.
The reality is that app pricing is a race to the bottom, with everyone searching for “free” solutions for almost every niche. That free-to-play funnel keeps gobbling up all the customers and making it hard to break in with a premium app.
It is possible with an excellent app, to win via App Store listings and positive reviews. Procreate — an app for digital art with the Apple Pencil — is a good example of a premium app that is successful.
Monetisation outside of Apps
Apps also can make money indirectly, by speeding up, enabling and making more ubiquitous the every day actions involved in business. Apps like Uber, AirBnb and Airtasker enable us to pay for services like transport or a home handyman. We think of AirBnb as an app but these are business transactions using an app as a channel.
The local government, the tax office, post office and big corporations like Facebook and Google often have apps to help folks engage with various parts of the business.
Smaller businesses often use web apps to manage restaurant menus, online stores and appointment bookings. What all these apps have in common, where the folks interact directly or indirectly with the business, is that tasks are at the core of success for these apps.
Success flows if Tasks are Completed
Let’s imagine your business has a special promotion for summer or winter or some new seasonal holiday, and you send out promo codes to your customers to take advantage of the offer. A task would be for a customer to take that code, shop on your app, and apply the code to their account.
The most important thing with tasks is that even if a customer can get almost all the way through the task, if they can’t complete it then you don’t make that sale. It might not be a literal sale, but it’s some interaction where the customer receives value, and engages with your business.
During the app development process, each iteration, the product owner is checking tasks can be completed inside of the app. If a feature is built by the engineers, that is verified by trying it out in the app.
Rule Number One for App Monetisation
So here is the first rule for making money from your app: identify the top 3 tasks that you want customers to engage with through your app; then absolutely nail the user experience for those tasks. Ensure that throughout the life of the app those tasks are constantly tested end to end to make sure they work.
Payments inside your app require ensuring trust. Customers will be looking for the hallmarks that let them know their money is safe, and what they are paying for will be received.
To ensure that tasks are working, conduct acceptance testing prior to your release where each step of the end to end task is tested on a phone.
In the case of in-app purchases (IAP’S) the Apple App Store has its own APIs for these which can make these transactions very secure. Likewise Google has its own commerce APIs. Both of these require custom native programming in the app to work.
Apple in particular is a stickler for getting these right. If a customer buys something in your app which they get to keep — for example upgrading to a premium version in the app, then you must provide for restoring that purchase if the app is reinstalled.
Both Google & Apple take a proportion of proceeds, but in return will handle a lot of customer issues such as chargebacks and paying in different currencies. Otherwise you can use a payments provider API.
Retention Rules
The second rule for making money with your app is stickiness. You need to keep your customers in your app. You need to think from their point of view.
On your app website you should have carefully crafted open in app linkage so that customers can continue their transactions from the website into the app. Folks who have downloaded your app should feel like they are special, and that they have special insight, or privileged access to your business. If your business has Street premises, then there should be prominent signage asking folks who have the app installed to use it to get special discounts, jump queues or gain other benefits.
Marketing promotions that utilise email should open automatically in the app if possible and include special promotional incentives to get app owners users to click through.
Careful use of mobile notifications is a great way to have users return to the app. You need to make sure that the notifications have been asked for specifically by the user, for example “notify me when an out of stock item comes back into stock”. When a user gets a notification it should be seamless for them to click through into the app and continue their task as cued by the message.
Growth can mean more Service Staff located where Customers Are
Boots on the ground is when people have to be in the same location as the customer to assist them in getting the value from the business.
Uber has to employ people to on-board new drivers, handle online complaints, and deal with logistical issues. Those people have to at least be in the same time zone and very often in the same geographical location. For AirBnb it’s the same. There is very often a need for support folks who speak the same language as the users involved in any complaint or issue.
A Real-life Story of App Entrepreneurs
One group of entrepreneurs I worked with during my start-up years came up with an app that involved trades people taking photographs.
The idea was that this would help the trades people show work had been completed in a trustworthy & high-quality way. The app was successfully built, but my entrepreneur friends found that the trades people did not want to start working with the it. They had several trades people download the app, but they had to go and visit them and show them how to use the app.
My entrepreneur friends underestimated how much cost in boots on the ground was required to get the app working.
They may need to be tutorials online, support staff, or people working with them in person to get started with the app. An app that’s been in the store for 18 months plus, all the kinks have been worked out and it has a user base. People know how to use the app because their friends use it.
The Gold Rush is Over
These days there are thousands and thousands of apps being submitted every single day to the app stores. This can work to your advantage as it allows a “soft launch”. This is a small launch to a niche set of customers. You can manually approach your customers and place the app in their hands, just like my entrepreneur friends had to with their trades persons. Or use pull up banners in a local city and hand out cards.
The soft launch process will allow your customers to experience your app, and you can witness that happen firsthand, recording any fixes that you immediately realise you need to make. Remember: simple apps with well chosen feature sets are the most successful money making apps.
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TL;DR
* There are a couple of different kinds of apps:
* ones that direct make money inside the app
* through in-app purchases, adverts, subscriptions or
* up-front “premium” in the App Store or Google play store;
* and commerce apps that help customers engage with a business.
* There are a few different models for monetization:
* Apps that directly make money include free apps; which rely on a funnel and a conversion process.
* Premium apps (pay once up front) are still a thing, but hard to make bank.
* Apps that engage with an existing organisation or business at least have a pre-existing customer relationship to leverage.
* App Economics
* Premium, Free-to-play
* Acquisition, Retention, Monetisation
* To make money from your app
* Trust must increase
* Ensure that customers can complete the tasks in the app
* Have your product owner and UX designer working
* to nail these task based designs.
* Avoid dumping a ton of features from your website.
* Choose 3 tasks, nail them
* Do acceptance testing on an actual phone
* check that your customers will be able to achieve those tasks.
Understand boots on the ground.
* Know how you will support your app when you release it.
* Release via a soft launch to a curated group of customers
* Get rid of friction points that block customer interaction
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